Short Answer: Yes.
Long Answer: see below!
I have just wrapped up my first month at Huff Law and in that spirit thought it would be a great time to talk about certain legal considerations when opening a new business. I understand that talking to a lawyer is probably not at the top of the “To Do” list when you’re starting out, but I can tell you based on past experience both personally and professionally spending a few hours up front with a lawyer can eliminate countless unnecessary stress and more expensive legal costs down the road. Below are several topics that you would be wise to review with a lawyer as you get your new venture off the ground!
Business Structure
When it comes to the legal structure of your business, there are a few options including sole-proprietorship, partnership or incorporation. The right choice for your business depends on your circumstances like the type of business, who else you have involved, how you are financing the business and how you plan to pay yourself!
If you do choose to incorporate, it is important to make sure it is completed correctly at the start. Registering a corporation with the provincial Corporate Registry is only one part of the process that is legally required. I can’t tell you how many times I’ve worked with clients to update a minute book when a bank wants to see it as a condition of financing, or to re-organize a company when a client discovers through tax planning that shares in the corporation were never actually formally issued in the first place! Correcting these mistakes often costs more than using a professional to incorporate the company up front.
Lastly, if you are a professional, your governing body likely has requirements in addition to the provisions of the Business Corporations Act for you to operate in compliance with the regulations of your professional association.
It is important to ensure that you are fully informed about the legal impacts and armed with the right questions to discuss with your accountant and other advisors as you make this important structuring decision.
Business Name
Depending on how your new business is legally structured, you will have to take different steps to protect your business name. This is important from a legal perspective because you do not want some other business copying you to gain from your efforts, or worse getting caught up in a lawsuit or suffering bad PR due to people confusing your business with another’s misdeeds.
Proper planning will help protect your business name and goodwill.
Risk Management
In business, as in life, there is always risk. It can’t be eliminated, but it can be minimized. Each business faces its own set of risks such as:
· Are you offering a service or produce where you should be using warnings or waivers?
· Do you have contracts in place with your customers to ensure you get paid in full and on time? (i.e. Just because you add interest to a late invoice doesn’t mean you have a legal right to collect it)
· Do you have all the required licences or have you met with all the statutory requirements to operate your business? (Where and how you interact with customers or clients can drastically influence your obligations to them)
· What policies do you have in place to deal with customer disputes, employee safety or to protect your reputation on social media?
Internally, there are other issues to consider such as how the owners deal with each other and how the business is run:
· How are the business responsibilities divided up between partners or shareholders?
· What is the ‘exit plan’ if one of the owners wants out?
· What happens if you are injured or temporarily unable to work?
· What happens if an owner dies or gets divorced? (Did you really intend to be in business with your business partner’s spouse or kids?)
Many of these issues can be mitigated by having proper contracts, shareholder agreements or operating/cost sharing agreements that address each of these concerns. As well, it is important to ensure that your personal estate planning is up to date and corresponds with the plans for your business. Ironing out these issues in at an early stage can help minimize external risk and save relationships with your business partners, customers and others.
Commercial Leases
Leasing your business location is often one of the biggest costs to a business and often locks you in for 5 to 10 years. Unlike renting a house or apartment, there is no statutory law that specifically governs commercial leases. Your obligations and your rights are determined primarily through the lease contract you have with your landlord. Your landlord does this for a living, so as a new lessee it is important to have the lease reviewed by a lawyer so you fully understand what you are signing up for.
Employment Issues
When your bring employees on board you must ensure you comply with the standards set out in the Employment Standards Code. However, these are simply that -“minimums”- and you may have additional obligations to staff that arise under the Common Law. The reality is that for reasons both good and bad, all employment relationships come to an end. Proper employment contracts will help ensure that the expectations of the business and the expectations of the employees are in sync which can reduce uncertainty and cost that could otherwise occur at the end of an employment relationship.
It is important to take time up-front or at as early a stage as possible to think about how to best legally protect your business. You don’t want to be scrambling when it’s time to grow!
I would be pleased to discuss these matters with you to ensure your business starts off on the right foot or review your current circumstances to ensure everything is up to date – It’s never to late! Don’t hesitate to contact me at 587-333-9173 or dan@hufflaw.ca
***Please note that the contents of this article are for information only and should not be considered legal advice. Huff Law will only provide legal advice after meeting with you, entering into a retainer agreement and reviewing your specific circumstances***
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